The next big test for the markets comes this week as Big Tech reports Q2 results. OpenAI-backer Microsoft (MSFT) is on tap after today's closing ...
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| | Top News  Getty Images The next big test for the markets comes this week as Big Tech reports Q2 results. OpenAI-backer Microsoft (MSFT) is on tap after today's closing bell, while Meta (META) will publish quarterly numbers tomorrow, followed by Apple (AAPL) and Amazon (AMZN) on Thursday. As in past quarters, the group of Mag7 stocks is estimated to account for the majority of earnings for the entire S&P 500 Index, but this time around, the accompanying commentary should be more of an important indicator of sentiment due to the recent rotation.
Early innings: Optimism over AI has undoubtedly been one of the biggest drivers that has propelled market indices to continuous record highs. The biggest tech players in the industry are flush with cash, so it makes sense to deploy capital to areas they see as the next engine for growth. Their core businesses are also doing extremely well, so it makes sense to keep one eye on the long term and build out the infrastructure necessary for the anticipated revolution.
However... Investors also now want to hear how all that spending will lead to profits, and understand artificial intelligence use cases and productivity models. The Big Tech giants don't necessarily have to show off revenues related to AI just yet, but painting that picture should be enough to keep shareholders in gear until that materializes. Successful conference calls and earnings commentary should separate capex spending from actual operating results, while outlining the need to go big at first and following up with more cost discipline (similar to the internet buildout in the 1990s and the cloud buildout that followed).
Cases in point: A stock can immediately benefit when following that prescription, especially for tech leaders that clearly outline their vision. A great example of this happened last month at WWDC 2024, when Apple (AAPL) portrayed how its new suite of products would lead to a consumer AI revolution, with the stock soaring by 13% since the conference. Contrast that to Alphabet (GOOG, GOOGL), whose shares fell 7% over the past week following an earnings call that largely steered clear of AI specifics and centered more on its legacy businesses (Search, Ads, YouTube, Cloud, etc.). | | Featured  Want to get more from investing efforts? Take our world-class Premium service for a test drive. Sign up now, and you can try all of Premium's powerful tools and resources: - Our proprietary Quant ratings, plus ratings from Wall St. and analysts on Seeking Alpha
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Past performance is no guarantee of future results. Any content and tools on the platform are offered for information purposes only. Seeking Alpha does not take account of your objectives or financial situation and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. | | Automotive Tesla (TSLA) advanced nearly 6% on Monday after being named a top auto pick at Morgan Stanley amid powerful emerging drivers of firm value. Not everyone is on board. Tesla's updated version of its autonomous driving software is impressive, but does not solve autonomy, Truist Securities wrote after a recent test drive. "The shortcomings that we observed make it challenging to imagine what Tesla will reveal in its RoboTaxi event in October," noted analyst William Stein, detailing a few times he had to intervene to avoid collisions. (141 comments) | | Economy "The borrowing just keeps marching along, reckless and unyielding," said Maya MacGuineas of the Committee for a Responsible Federal Budget, as the U.S. national debt crossed $35T for the first time. Recall that the deficit hit $34T earlier this year and passed $33T just three months before that. The tide of red ink is swelling at a much faster pace than expected amid increased interest costs and mandatory spending on federal programs. The Congressional Budget Office last month even projected that the national debt would rise to a record 122% of GDP in 2034. ( 10 comments) | | Energy The Biden administration is buying over 40M barrels of oil to replenish the U.S. emergency stockpile, but needs more money from Congress for additional purchases. Following a record drawdown to tame crude prices after the Russian invasion of Ukraine, the Strategic Petroleum Reserve now holds 375M barrels, compared to 600M barrels at the start of 2022. While the government plans to continue SPR purchases into next year, it only has around $1.2B left to spend in its oil purchase account (enough for about 15M barrels). "We would like to, of course, do more than that," said Deputy Energy Secretary David Turk. "But we do need additional funds." ( 4 comments) | | Today's Markets In Asia, Japan +0.2%. Hong Kong -1.4%. China -0.4%. India +0.1%.
In Europe, at midday, London -0.2%. Paris +0.4%. Frankfurt +0.4%.
Futures at 7:00, Dow +0.1%. S&P +0.2%. Nasdaq +0.2%. Crude -0.1% to $75.73. Gold +0.4% to $2,434.90. Bitcoin -4.4% to $66,577.
Ten-year Treasury Yield unchanged at 4.17%. Today's Economic Calendar | | | | | Seeking Alpha's Wall Street Breakfast Podcast Seeking Alpha's Wall Street Breakfast podcast brings you all the news you need to know for your market day. Released by 8:00 AM ET each morning, it is a quick listen that you can put on as you get ready to start your working day. | | | | |
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